Tribe votes in favor of lease agreement with Wal-Mart

A move to bring a 120,000-square-foot superstore to the Eastern Band of Cherokee Indian Reservation has been in the works for nearly four years. On May 20, the tribal council voted in favor of approving a ground lease with the company. The vote was split, with three council members opposing and nine in favor of the measure.

“When completed, the Cherokee Wal-Mart Supercenter will be part of a much larger mega-retail development offering products and services currently not available to Tribal members and visitors to the Qualla Boundary,” said Mickey Duvall, planning and development director for the tribe, in an email statement.

The tribe would be in charge of constructing the $25 million building for Wal-Mart on a 22-acre parcel of land on the reservation, according to Duvall. The tribe would then lease the building to Wal-Mart at a cost of between $564,000 and $720,000 per year, Duvall said. The lease agreement is for a mandatory 20 years plus six optional five-year renewals, for a total of 50 years.

If Wal-Mart made an average yearly lease payment of $642,000 over a 20-year period, the tribe would only receive $12.8 million — just over half the cost of constructing the building.

The idea that the tribe may not recoup the full amount it pays to construct the Wal-Mart was the primary reason tribal council Chairman Mike Parker voted against the lease agreement.

“There’s no guarantee that they’re going to stick around long enough to pay that money back,” Parker said. “I wasn’t opposed to Wal-Mart, just the idea of giving them $25 million and then with no language in the lease holding them to that amount, I just couldn’t rationalize that in my mind. It doesn’t make business sense to give them $25 million with no guarantee.”

But according to Duvall, the tribe had little choice but to construct the building if it wanted to land Wal-Mart on the reservation.

“Since the Wal-Mart cannot purchase or own trust property on the Qualla Boundary, the tribe elected to build and own the building and lease it back to Wal-Mart,” Duvall said.

Additionally, tribal officials are anticipating that the superstore will bring in nearly $214 million in tribal levy over a 25-year period, with the amount of levy gradually increasing with each five-year period. The tribe’s levy rate is 7 percent.

“This project alone will almost double the current Tribal Levy collections,” Duvall said. However, some of the levy raised by sales at Wal-Mart will be in lieu of sales already occuring at other stores on the reservation, so not all the levy would be considered a net gain.

Duvall said there are two scenarios for the Super Wal-Mart’s opening date. The “fast track” scenario has the store opening by December 2011. The “regular track” scenario has the store opening by December 2013.